Occasionally a new client will ask me if they can continue to use their old tax preparer for their personal return (while my firm does all the business returns). I’m never a fan of the idea, but until this past week I didn’t realize how much of a problem it could be.

In this particular case, the K-1 had some more sophisticated issues. There was a loss in the company, but because the client had signed on the debt, it was considered recourse. You can not take a loss on your personal tax return unless you have enough basis. So, without understanding the K-1 my client had provided, and without asking any questions, the old tax preparer had disallowed the loss.

I knew my client wasn’t happy with his tax strategy from last year, but I didn’t realize what was going on because he had two different tax preparers involved. This past week I got a copy of his personal return and saw what had happened.

Now my client is faced with the same issue he had last year - how to tell someone he likes that he’s outgrown his services. The only difference is that now he also has to figure out what he wants to do with the past year’s return. Amend, and risk an audit. Or, let it go and chalk it up to experience.

The Success Story part is that we can save him a lot of tax money, once we get control of the entire process - strategy, implementation AND compliance (preparing the tax returns).